Why? Energy demand is rising rapidly Notes • All energy (not just electricity) is expressed in terms of Giga. Watts (GW)*. • 1 Gigawatt = 0. 75 Million Tonnes of Oil Equivalent per year = 8. 8 Terawatt-Hours per Year • 1 Gigawatt is the usual size of a nuclear power station or large coal power plant * In agreement with the recommendations from the Royal Commission for Environmental Pollution Sources: Reference Scenario, IEA (2004) World Energy Outlook; A 1 T Scenario IEA (2003) Energy to 2050

Discussion Points • • How do we scale up renewable R&D by a large factor & coordinate internationally? How fast can we build a super-grid with CSP? Does doing one technology prevent us from doing another? Are possible supply chain shortages ‘across’ technologies or ‘within’ technologies If the cost of high and low carbon are the same, is there any financial limit on what we can do? Does tackling climate change then cost anything at all? If new technology costs more, is there a limited ‘pot’ of subsidy to be allocated to most promising technology? Can ‘inflexible’ technologies promote a path to electric-car charging, leading to further intermittent renewable power being easily integrated? Market Incentives (19 th Century Railways) or State Intervention (20 th Century Wars) or Both? 19

Should We be worried? • • GW is major threat. Rational ranking of risks: GW ranks above nuclear power risks. Still uncertainty over final emissions, final warmth, final outcomes ‘Russian roulette with our children? ’ Collective action problem Mancur Olson (1982): “. . . If we finally get the information that the ecosystem can’t take any more, then it is important that we have the open-mindedness needed to change our views and policies the moment decisive information arrives. Those who shout wolf too often, and those who are sure there are no wolves around, could be our undoing” (Olson, M. Environmental Indivisibilities and Information Costs: Fanaticism, Agnosticism and Intellectual Progress The American Economic Review Vol 72, No 2. Papers and Proceedings of the Ninety Fourth Annual Meeting of the American Economuc Association (May 1982) 262 -266) 29

The Sovereignty of Nation-State • A Basic precept of Domestic politics and International Affairs Consequences: • Nation States can impose taxes & laws, democratically agreed • Nation states act ‘selfishly’ in international arena • No strong Global institutions 30

“The Tragedy of the Commons” • • Each country acts in its own self interest. No-one takes responsibility for the common good. • • VERY TRAGIC Policies to convert away from fossil fuels may cost nothing or a negative amount on a global scale However, there are solutions that are attractive on a national scale. • 31

Welfare Economics Perspective • • Have a Environmental Externality Need a Binding International Agreement so that private costs = social costs e. g. : – – Global Carbon Tax or Global Emissions Trading BUT • No global government – no taxation • International agreement difficult • Agreements are in any case not enough • Incentives for countries to defect 32

A Simple Management Perspective • • Have a Problem Need to find Solution Keep it simple! Importance of leadership. 33

“Business as usual” would lead to disaster within a few decades (2100 CO 2 concentration 920 ppm) Dangerous Threshold Passed (550 ppm) (CO 2 Now: 380 ppm) • Model committed temperature (the temperature rise expected as a result of emissions up to that point). • Note that temperature rises do not include the effect of other greenhouse gases such as methane. • For spreadsheet model and discussion of assumptions see website: www. zerocarbon 2030. org. Sources: Sceffer, M et Al. (2006), Defra (2006).

Converting Domestic Heating Heat pumps • Move heat from a low temperature heat source (such as the ground outside) and transfer it to a high temperature heat sink. • Powered by electricity (from nuclear or renewables). • Uses up to 80% less energy. • Using pump to heat a domestic water tank can smooth demand & store energy. A heat pump uses electricity to move heat from outside to inside a home. It works on the same principle as a refrigerator reversed. Heat pumps use 50 -80% less energy than gas boilers. Heat pumps can be installed in both new and existing houses Image: Heat Pump theory From Wikimedia

Converting Domestic Heating (2) The Zero-Emissions House Ground source heat pumps + Better house insulation + Underground air circulation + In/Out heat exchanger = 90% reduction in energy consumption Combining a heat pump with a well -insulated hot water tank allows energy to be consumed overnight when prices are low. If we use non-emitting electricity (e. g. nuclear or microgeneration), CO 2 emissions from domestic heating could be reduced by 99%. Building regulations must ensure that all new houses have low emissions.

Converting Transport: Short distance Electric Cars • Technologies developing quickly, following success of Toyota Prius • Full conversion possible by 2030 Reductions in car use • Charge for road congestion • Health benefits of walking and cycling, especially for children • Better urban planning & public transport Electric cars store energy in batteries when recharged overnight (when electricity prices are low). Hydrogen fuel cell technology developing and may be in use by 2030. Hydrogen can be produced using nextgeneration nuclear power stations. Image: Toyota Prius From Wikimedia Commons

Converting Industry • Imposing a carbon tax without a low-emissions alternative would encourage industry to leave. • Industry requires a secure, reliable and cheap alternative energy source. • Nuclear electricity is low cost (especially at night) and provides a secure and independent source of energy. • Some (heavy) industry cannot be converted. • There is currently no other solution than nuclear energy.

CO 2 Reduction Target • • UK Target: CO 2 emissions 80% reduction on 1990 levels by 2050 Sweden recently adopted same target Significant progress (30% reduction) by 2030 Aim is that such cuts, if adopted worldwide, would avoid ‘Dangerous’ Climate Change More recent evidence suggests even deeper cuts may be required Some countries may not cooperate, so perhaps UK cuts need to be even deeper to compensate/lead? Is a near-zero carbon economy economically feasible? 54

Security of Supply • • North Sea oil and gas are running down. Natural Gas provides a large and increasing proportion of our supplies Britain now net importer of gas Possible Fuels: – – Natural Gas from Algeria, Russia. . . Oil from Middle East… Coal: reserves are local (but most mines have closed; environmentally very damaging). Uranium from Australia and Canada. 55

Where is the Oil? 56

Energy Security Source: IEA (2005) 57

Economic Efficiency A solution that maintains material prosperity: a) People wish to maintain a comfortable standard of living b) British policy will be more influential if we are seen to be prosperous c) Balance of payments d) Sustainability and demographic transition requires ‘genuine saving’ (capital investment). 58

The French Experience • Major building program 1970 s – 1990 s. • Now 80% of electricity is generated by nuclear. • Realised economies of scale by using one design. • Often with duplicate units on same site. • France now has the lowest electricity prices in Europe. • Electricity is a major export good.

What makes a difference? 64

Nuclear: What are the Constraints? (1) Uranium Reserves? • Concentrated in stable countries such as Australia and Canada. • Sufficient for a large expansion in the nuclear industry. • Fuel costs are only a small part of cost of nuclear – rises in Uranium price will lead to more reserves becoming economic. • Fast breeder reactors or Thorium can take over if Uranium becomes scarce. • New technologies (chemical nets) are being developed for efficiently extracting nuclear from seawater with low energy expenditure: Uranium in sea water is replenished constantly, so it is practically unlimited. • UK has large existing supplies of Plutonium (100 tonnes: 2/3 of global civil separated uranium) which can be burnt in ‘Mox’ fuel. • Globally, decommissioned nuclear weapons are also a potential source of fuel.

Nuclear: What are the Constraints? (2) Available Sites • Some nuclear reactors (first few) can be based at existing sites. • New reactors much more compact: more than one reactor can be built in each place. • For a 100 GW expansion, perhaps 50 new sites (not threatened by flooding or coastal erosion) should be found across Britain. Need public information campaign about new reactors. • Public acceptability of nuclear will increase if it is seen as a solution to the problem of climate change. Skills • Main constraint for the UK. • We need a massive program to train of the order of 100, 000 new nuclear engineers over the next few years. • Better science/maths at school (teacher pay? ). • Sponsorship programs for young engineers.

Nuclear Costs and Risks • • • 100 GW of new nuclear capacity in UK Cost: £ 20 bn pa over 10 years Approximate Cost ~ £ 2 bn per GW. Could be built in private sector (or partnership of public and private) Government must reduce financial risk for private investors: – – – – Some government help with initial planning and regulatory issues. Need to ensure standard designs (EPR, AP 1000, ACR) to achieve global economies of scale. Guaranteed minimum prices. ‘Non-carbon’ obligation? Strong statement of intent. Some direct public investment? Electricity market design to encourage private investors in nuclear. Price guarantees can massively reduce financing cost but need not put the government at financial risk (since government has control over carbon taxes). 67

Benefits of this Plan a) b) c) d) e) f) g) Britain would have sufficient, secure, low emissions, lowcost energy for 50 years. Strategic independence. Massive reduction in CO 2 emissions. If internationally standard designs were used, there would be beneficial effect on economics of nuclear power worldwide: a) b) Reduced uncertainty for investors: Learning by doing and economies of scale. British industry would have a low cost low carbon energy source. Governments could put up taxes on carbon without industry moving abroad. Britain would give a moral example on CO 2 emissions to the rest of Europe and world. Market Design innovations would aid US policy makers

Summary • To prevent ‘dangerous’ climate change we need to act rapidly. • We must invest in all low-emissions technologies. • Nuclear can generate a large part of our total energy (not just the part that is currently electricity). • If UK built 100 or so low-cost mass-produced passively safe modular nuclear reactors, the world would have a safe, clean unlimited supply of power that would be cheaper than all fossil fuels. • Cars and domestic heating can be converted to run off electricity. More freight can be transported by rail. • Cuts in consumption (e. g. aviation, long distance car use) are also necessary.

What is the Renewables Obligation? • • The Renewables Obligation requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity they supply from renewable sources. The current target is 6. 7% for 2006/07 rising to 15. 4% by 2015/16. It is expected that the Obligation, together with exemption from the Climate Change Levy for electricity from renewables, will provide support to industry of up to £ 1 billion per year by 2010. At the end of 2005, generation from renewable sources eligible under the Obligation stood at 4%. 72

What is the Climate Change Levy? • Commodity Climate change levy (CCL) is a tax on electricity, gas, coal and liquefied petroleum gas (LPG) used for energy, and is levied on the non-domestic sector. The levy is intended to encourage business to use energy more efficiently and is designed to help the UK meet its targets for cutting greenhouse gas emissions – in particular, to reduce carbon emissions. More broadly, improving energy efficiency also helps businesses to reduce their energy costs and makes them less vulnerable to energy market volatility. Legal Rate Pence/k. Wh Electricity 0. 43 p/k. Wh 0. 43 Natural Gas 0. 15 p/k. Wh 0. 15 LPG 0. 96 p/kg 0. 07 Coal 1. 17 p/kg 0. 15 Charged on all electricity (including nuclear) 73

Note the methodology used for standby generation in this study has been disputed, but that wind has systematic impacts on the electricity grid (associated with intemittency) with an associated cost. 85